Fed Back To Its Secretive Ways, Sells $7 Billion In Maiden Lane Assets Directly To Credit Suisse Without Public Auction

Instead of opting for a publicly transparent BWIC in the disposition of its Maiden Lane II assets, the Fed has once again gone opaque - long a critique of the Fed's practices which have required repeated FOIAs in the past to get some clarity on its secret bailouts and transactions - and proceeded with a private sale, without any clarity on the deal terms, in which it sold $7 billion in face amount of Maiden Lane II assets direct to Credit Suisse. The alternative of course would be the same snarling of the MBS and broadly fixed income market that we saw in June of last year. In other words, the Fed looked at the options: transparency and risk of grinding credit demand to a halt, or doing what it does best, which is to transact in the shadows, and avoid capital markets risk. It opted for the latter. As to why the Fed decided to go ahead with a deal shrouded in secrecy? "The New York Fed decided to move forward with the transaction only after determining that the winning bid represented good value for the public.""I am pleased with the strength of the bids and the level of market interest in these assets," said William C. Dudley, President of the New York Fed. Because if there is one thing Bill Dudley and the Fed knows is gauging what is in the best interest of the public... and the callorie content of the iPad of course.

The Federal Reserve Bank of New York today announced that it has sold $7.014 billion in face amount of assets from its Maiden Lane II LLC (ML II) portfolio through a competitive process to Credit Suisse Securities (USA) LLC.

The transaction was prompted by an unsolicited offer from Goldman Sachs & Co. to BlackRock Solutions, the investment manager for ML II, in January 2012, to buy a portion of ML II assets. Consistent with its March 2011 announcement regarding the disposition procedures for ML II, which allowed for these types of reverse inquiries, the New York Fed directed BlackRock Solutions to conduct a sale via a competitive process. The four broker-dealers included in the competitive process were Barclays Capital Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. The broker-dealers were selected based on their previous expressions of interest for large parcels of the portfolio and/or their participation in the ML II bid list process conducted last year.

The New York Fed decided to move forward with the transaction only after determining that the winning bid represented good value for the public. This transaction substantially reduces the ML II portfolio and loan at a desirable price. Furthermore, the transaction is consistent with ML II’s stated investment objective.

"I am pleased with the strength of the bids and the level of market interest in these assets," said William C. Dudley, President of the New York Fed.

Net proceeds from the sale will be reported as part of the portfolio’s normal reporting schedule on April 16, 2012.

As stated previously, the New York Fed, through BlackRock Solutions, will dispose of the remaining securities in the ML II portfolio individually and in segments over time as market conditions warrant through a competitive sales process, while taking appropriate care to avoid market disruption. There will be no fixed timeframe for the sales; at each stage, the Federal Reserve will only transact if the best available bid represents good value for the public.

The New York Fed publishes on its website a list of all the securities in the ML II portfolio. In order to allow the public to track progress on asset dispositions, the New York Fed provides monthly updates on portfolio holdings and a list of the securities sold within the prior month. In addition, it provides quarterly updates on total proceeds from sales, including a breakdown by counterparty. The New York Fed will also provide further details regarding all ML II transactions, including an account showing the acquirer and the price paid for each individual security three months after the last asset is sold, ensuring timely accountability without jeopardizing the ability to generate maximum sale proceeds for the public.

The New York Fed will also provide further details regarding all ML II transactions, including an account showing the acquirer and the price paid for each individual security three months after the last asset is sold, ensuring timely accountability without jeopardizing the ability to generate maximum sale proceeds for the public.

How exactly do secret backdoor deals between banks and the Fed, a private bank owned by the banks, generate maximum proceeds for the public?

I am suprised this deal passed mustard with our Nation's banking regulator...oh wait...that would be the very same Federal Reserve Bank. Nevermind.

Ron Paul does not have a face - all media coverage around the World ignores him. I have heard zip of what he has spoken of. At best you now see his face for 1 second. What is going on ... If Gingrich is the best the repugs have to offer then its all over red rover. That man is a retrograde 100 % retarded money grubbing, lying, lazy, moral bankrupt with a passion for money and power and a beltway champion of giveme-giveme.

In essence "down under" we have a saying - this is an Election a cattlemans threelegged, one eared, casterated dog could win.

After he nukes the republican party and makes a third party run. Once the American public see the choices they have: an incompitent multi-trillion dollar nothing to show for deficit plagued debt laden one termer, a status-quo my turn flip flopping shiny teeth plastic haired PAC backed rich boy, or a stead fast US first non interventionist rad spending cutter ala Shopshire Slasher constitutionalist libertarion patriot, they will choose the wheat and throw away the chaff.

It ain't about how he places in Podunk primaries. It's about how many pledged delegates he has at the Convention in August in Tampa. Always look behind the curtain. No 3rd party shenanigans are needed.

"Always look behind the curtain"---at the nameplate on the voting machine. Ron Paul will never get elected as long as the vote is tabulated electronically. They didn't buy all those expensive Diebolds for nothing.

So, why the sudden interest on the street in MBS? Remember, the Squid initiated the request for bids by making an unsolicited offer. I bet this means the Fed has tipped its intention to buy mortgages via QE3. Announcement by March?

The Fed gets an unsolicited bid for $7 billion face value of totally crap securities under Maiden Lane from Goldman. Then under the dark of night a private auction is conducted among the private club of primary dealers and kept out of the public eye.

So... we see here that Credit Suisse "wins". Of course, the likely winning bid is now where close to face value... right?

If we get to the point where the Fed is back to monetizing crappy MBS again (the way Bill Gross believes... seemingly hand over fist)-- can we assume that the Fed could go right back and buy the MBS they just auctioned from Maiden Lane for $3 billion (hypothetically)?

I ask, because we all well know that the Fed has earned a very nasty reputation for buying worhtless things for face value (or above face value). In theory, may it not be possible that Credit Suisse sells back, say $1 billion in MBS at face value to the Fed... and bought it for only $400 millions weeks before? From the very same counterparty?

If that is the case, I really do want to be a part of the Big Boy's Club.

Can't see the benefit of applying anythign towards mortgage rates these days, because Jesus christ they are basically at 1%, and people do not want to buy and of course no one can refinance. As useless as sending a bunch of nuns off to get a boob job!

I just got one at 3.8%. I think that the point will be that the Fed "has your back" and that they will drive down mortgage rates even lower, to "stimulate housing demand". The problem is that this will prolong the apathy of would be buyers as they feel rates will go lower and stay low for a very long time. It will, however, pump the banks earnings and balance sheets... 'nuff said.

Yes, another reason that it won't work--pushing on a string. I don't know how much further prices would need to fall to make it CHEAPER to buy than rent. The housing market will continue to slide until it is actually significantly cheaper to own, IMO. Moreover, when inflation regains prominence as a major concern in the MSM, (and when it triples today's level, MSM will not be able to ignore it), it will cause anyone with the where-with-all to go out and get a mortgage. The best defense against inflation (after PMs) is debt.

And Trav, I would not advocate any purchase that would require income growth to make it feasible.

There are an incredible amount of properties out there that never got caught in the MERS mess... I just bought one... The thing to worry about isn't title so much as taxes...

I'll also say that, in my neck of the woods, the cost to buy is significantly less than the cost to rent. The problem of course is that in our biflationary nightmare, wages are stagnant or declining... so, to those who would suggest debt as a hedge against inflation, I strongly urge otherwise if you have the least bit of worry about your timing... you might get inflation all right... but not any corresponding increase in wage to pay the loan. (aside from the fact that this inflation will likely apply significant downward pressure on home prices). Not good.

I'd be more enthusiastic about such an interpretation except I keep wondering what number of people could *possibly* qualify for a mortgage at this point. It seems to me that the only folks whose finances are in shape to get a loan already have houses.

I'm just looking at the demographics. Median household income last year was $50K. Median housing price $165K.

If it's unreasonable to expect 10% of the households to buy a house in the next year (and I believe it is), the market still has a LONG way to fall (40%?). The only other possibility is that rents have to climb dramatically. But a landlord can't get more rent than the locals have to pay, so that doesn't look possible.

correct, MBS purchases in a QE3 (as in previous attempts) is not about "home ownership" , "housing market" or "mortgage rates" it is about balance sheets and political talking points. shit, the new "G" fee to Fannie and Freddie (to "pay" for the payroll tax extension) raised mortgage rates ...so they are now going to buy MBS to lower rates back down? APOR on a 30yr is 3.950%, how much lower do rates need to be to usher in the utopian economic recovery? bullshit, it's about balance sheets and nothing else.

A private firm completes a deal that is in the best of the average American. Yeah, okay. We are going to have create a list of Fed funnies in the same tradition as "I am from the Government and I am here to help you", "the check is in the mail", and "really, I won't ___ __ ___ mouth" (had to censor the last one for any minors in the room... LOL).

Shitnami seems like it, but I'm sure lost as to what the objective could be. Given the PIMCO connection, could it really be that the Fed is going to go balls-out buying negative yield paper? Seems too absurd to believe. For what possible benefit could such a strategy be pursued?

This is one of the underlying plans/themes... the GSEs and FED are merely laundromats for toxic assets that will be purchased with the spoils of the wealth gap for pennies on the dollar. Early in the going, the loss to the GSEs or FED might be small to none, but keep watching...

Much the same way federal regulators will siphon small and regional bank turds into the TBTF to bolster the balance sheets... the name of the game is consolidation and continuously increasing systemic risk...

It's kind of like putting mud into a wash plant and then a sifter and watching the gold get sorted out...

Are you serious? Credit Suisse is only by name and theoretical headquarter address a Swiss bank, the investment bank part is what was formerly known as First Boston. Blue Blood Smart Banksters of true historic Boston Heritage. Cozy relation to the FED is built in as a US Sovereign Bonds Primary Dealer.

Never mind this. One has to only look at EUBSC <INdex> on Bloomberg (or LOIS EUR) to realize that there has been a stealth QE going on. USD are being put out there like nobodies business - which explains the compressing swap spreads and the heavy bid on risk assets.

Charles Gasparino is on Fox Business News now after this commercial break talking about how Obama called for a resolution to the robosigning controversy before the State of the Union address next week. It'll be a spank on the wrist like Goldman got from the SEC a couple years ago regarding betting one way on the mortgage market & selling customers opposite posiition

i heard Gasperino say 'as reported by Zerohedge' last august about something on FBN. Charles Gasparino def reads this website I heard it w/ my own ears live and couldn't believe it...he said it quickly in passing and under his breath, but he said 'as reported by ZH' on FBN (LIVE, obviously or it wouldve been edited)

As much as I'd like to agree with you, I think we are on a course to take out the '07 highs. The truth is that it's unbelievable that we are even close when you think about how different the world is today. Ben and the POTUS have created a Frankenstein with their 5 Trillion of added debt. I sometimes feel like every cent of it has gone into the market and none of it to Main Street. It will be pushed to those highs for the symbolism it would provide and in hopes that it will attract fresh cash. IMHO.

This sort of thing has been common in third world countries where there actually is a vast separation between rich and poor. In those places you are rich if you are connected to government and get the benefits of making the rules.

And now it is worse than ever in America. Those connected to government are multi millionaires. Congressmen are vastly richer than at any point in history. Federal reserve member banks make up a sizable portion of our economy.

You cannot compete with that kind of wealth transfer. You do not have the power to pass laws and enforce them through the threat of physical force. In this particular case, government owned assets are given away in a friendly deal without any competitive bidding process. You can be certain that lots of people made millions of dollars in this deal. And it wasn't because they somehow created real value in a competitive marketplace.

Where did that new wealth they have come from? You! In the form of currency debasement. A competitive bidding process would have resulted in a higher price to the federal reserve, ie. more money out of circulation.